Treatment of F9 embryonal carcinoma cells with retinoic acid induces differentiation to an endoderm cell type. A new cell line (DIF 5) derivaed from F9 cells after prolonged treatment with retinoic acid has been isolated and characterized. DIF 5 cells appear to represent an intermediate in differentiation which is blocked in its ability to complete retinoid-induced differentiation. DIF 5 cells secrete and deposit large amounts of extracellular matrix components (fibronectin, laminin and type IV collagen). These cells also exhibit good cell growth in the complete absence of serum or hormonal supplements. These cells thus offer an excellent system to study the modulation of extracellular matrix formation. In addition DIF 5 cells will be useful to study mechanism involved in growth regulation and the production of embryonic growth factors. Studies indicate that DIF 5 cells do produce and insulin-like growth factor (IGF). When DIF 5 conditioned growth medium was chromatographed on Sephadex G75 in 1M acetic acid two peaks of activity are observed which compete for specific [125I] multiplication stimulating activity (MSA) binding. MSA is the rat homologue of human IGF-II. The high molecular weight fraction (MR about 60K) apparently corresponds to IGF binding protein, while the low molecular weight fraction (Mr about 8-10K) apparently is biologically active IGF. These findings suggest that ectopically produced IGF may serve as an early embryonic growth factor.